A Single-Product Inventory Model for Multiple Demand Classes
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4542-05.pdf
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215.96 KB
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Author(s)
Arslan, Hasan
Graves, Stephen C.
Roemer, Thomas
Date Issued
May 27, 2005
Series/Report no.
MIT Sloan School of Management Working Paper;4542-05
Abstract
We consider a single-product inventory system that serves multiple demand classes, which differ in their shortage costs or service level requirements. We assume a critical-level control policy, and show the equivalence between this inventory system and a serial inventory system. Based on this equivalence, we develop a model for cost evaluation and optimization, under the assumptions of Poisson demand, deterministic replenishment lead-time, and a continuous-review (Q, R) policy with rationing. We propose a computationally-efficient heuristic and develop a bound on its performance. We provide a numerical experiment to show the effectiveness of the heuristic and the value from a rationing policy. Finally, we describe how to extend the model to permit service times, and to embed within a multi-echelon setting.
Subjects
Single-Product Inventory Model
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